Recently, Ugandans discovered the shocking levels of the county’s debt with foreign loans making every Ugandan liable to loan repayments estimated at Shs992,500 each over the next 94 years.
According to the Parliamentary Committee on National Economy, the stock of external debt for both public and private sector for the 2016/17 Financial Year was 41.4 per cent of gross domestic product (GDP).
The concern for many people is that the high cost of accumulated debt over the last 30 years demonstrates government’s addiction to foreign loans, a burden laid on the average Ugandan for generations to come.
The Treasury operations budget presented to the parliamentary committee indicates Shs1.3 trillion is earmarked for external debt payment in the next Financial Year, with Shs360.8 billion meant for loan interest and Shs60.8 billion for commitment charges.
Government’s account for Uganda’s high debt burden is infrastructure investment. The explanation seems to be unsatisfactory since debts significantly accumulated over the last 30 years and yet tarmac roads only appeared significantly in the last 10 years.
Ugandans are left paying too much: high interest on foreign loan repayments, paying for the privilege to use tarmac roads, not to mention the new taxes that are coming soon. The high public debt incurred by government on behalf of unaware Ugandans has reduced people to a hand-to-mouth life.
The painful contradiction is that you can no longer say we are working for our children and grandchildren since loan repayments costs are automatically being passed to generations even before birth.
In 2017, President Museveni advised that as long as Uganda stays within the 50 per cent danger zone, “There is no need to worry about debts, even after we have borrowed for railways and dams, the debt will be about 38 per cent of GDP, which is below the 50 per cent danger zone.”
Interestingly, some economists say the 38 per cent rises significantly once the money is received; the percentage moves closer to the danger zone threshold. Undoubtedly, heavy public debt effects coupled with corruption has systematically drained government resources that could otherwise be used to address dire poverty and high unemployment.
According to Patrick Njoroge, the governor of the central bank of Kenya, there are dangerous effects of shocks with the increasingly risky international environment.
“Threats to market access post-Brexit Britain, Donald Trump’s America, currency interest-rate movements, African governments should look for alternative sources of financing, domestic borrowing and public-private partnerships,” he says.
In 2017, Finance ministry Permanent Secretary Keith Muhakanizi warned that infrastructure development through loans was becoming expensive and unsustainable. Uganda, now cornered in a reactive position, needs to re-examine her situation after voracious, ruthlessness foreign debt mismanagement and pillage.
Although the long term African vision Agenda 2063 is building world-class infrastructure to facilitate trade and grow intra-African trade from currently less than 12 per cent to about 50 per cent by 2045, Uganda is in a vulnerable position. Government is desperately looking for money. With the introduction of several tax Bills in Parliament such as the social media tax, clearly domestic tax is the new goldmine.
According to the 2017 World Bank 9th Economic Update Report, Uganda’s current infrastructure yearly investment financing gap is $1.4 billion (about Shs5 trillion). High inefficient infrastructure and corruption yearly costs is estimated at $300 million (Shs1.1 trillion), mainly due to inappropriate pricing, the sector’s inability to complete projects within budget and on time.
If government doesn’t crack the whip on corruption and improve institution inefficiencies, Uganda will continue losing on multiple fronts.
Ms Victoria Nyeko is a media commentator.